Mortgage Market Positive to Start the Morning

A little better start this morning in the bond and mortgage markets. The dollar weaker, stock indexes weaker following selling in global markets and crude oil lower. President Trump has moved in, 500K women descended on Washington on Saturday and thousands of others around the country rallied against many of the issues Trump has outlined. In the meantime, already turmoil between the new Administration and the media, arguing over the number of attendees at Trump’s inauguration. Media reporting numbers much lower than previous inaugurations while Trump’s folks say the media is distorting data. This did not last 48 hours before the lines were drawn. And who cares how many did or did not attend.

US and global equity markets have slowed recently after blind faith overtook investors after the election. Blind to specifics and details, investors led a march to one of the strongest post-election rallies ever. The last few weeks’ investors halted - not a big deal but forecasts now are for some additional declines as markets await details. One thing I have noted previously, those expectations for increased fiscal spending this year are winding down with the realization that it will take a year or two to see any significant job creation from infrastructure to engage. Overall, Washington politics is a slow boat and delayed decisions - likely to roil the Trump administration. The dollar remains a key factor for interest rates and stocks.  Adding to the market’s present uncertainty now, Trump last week said the dollar is too strong then his Treasury nominee Steven Mnuchin emphasized Treasuries mantra that the US wants a strong dollar.

There are no economic releases today. This week Fed officials have gags on ahead of next week’s FOMC meeting that begins Tuesday the 31st. No interest rate increases at that meeting but the March meeting may see a move up. The Fed led by Yellen still talking about three FF rate increases this year. Yellen saying last week it would be gradual - if three are in the picture the and the Fed wants gradual it cannot put it off too long otherwise gradual will not fit. Yellen though also talked last week about waiting to see the Trump effect before making hard decisions. Nothing new about any of it - the Fed since 2008 has been continually sending out confusing comments and too many Fed officials have added to market uncertainties.

Last week we saw a turn in the MBS markets by 79BPS, and the 10yr increased its yield to 2.47%.  After a volatile week, we are expecting much more the same as President Trump's comments and executive orders are the most likely events to move mortgage rates and cause volatility in the mortgage rate markets. Currently at 11:00AM, we have seen the mortgage market turn for the better with an increase 36BPS on MBSs and the 10yr has dropped to 2.39%.